Social Security earnings limit question - do stock dividends count toward my SS income restriction before FRA?

Great questions! I can help with this: 1) Dividends are taxable in the year you receive them, even if you don't withdraw the money from your brokerage account. You'll get a 1099-DIV form from your brokerage showing the dividend amounts, and you'll need to report that on your tax return. Depending on whether they're qualified or ordinary dividends, they'll be taxed at either capital gains rates or your ordinary income rate. 2) The GOOD NEWS: Dividends do NOT count toward the Social Security earnings test! The earnings limit only applies to wages from employment or net earnings from self-employment. Passive income like dividends, interest, pensions, annuities, capital gains, or rental income doesn't count against your earnings limit. So you can collect those dividends without worrying about your SS benefits being reduced. Just make sure you properly report the dividend income on your taxes.

When my wife got an inheritance with stocks we just cashed everything out right away bc we didnt want the hassle of all this paperwork and tax stuff. much simpler that way imo

Just adding to what others have said - you're absolutely correct to check this! But as mentioned, dividend income is considered "unearned income" by the SSA and doesn't count toward your earnings test limit before FRA. The SSA only counts "earned income" which means: - Wages from a job (W-2 income) - Net earnings from self-employment They DON'T count: - Dividends - Interest payments - Capital gains - Pension payments - Annuity income - Investment income - Lottery/gambling winnings However, remember that even though dividends don't affect your SS benefits, they still need to be reported on your tax return! And depending on your total income, your dividends might make more of your Social Security benefits taxable - that's a separate issue from the earnings test.

AGREE with others - dividends definately DONT count for earnings test!!! BUT be careful because IF you start actually WORKING at a company where you own stock, THEN your wages from that company DO count!!! My brother got confused about this and ended up with a HUGE overpayment notice from SSA when he took a part-time job at a company he owned stock in!!! He thought since he was a "owner" it was different but SSA said NO WAY!!!

When I got stock from my parents I had SO MANY questions too. had to call SSA like 3 times and got different answers each time!! so frustrating. finally got someone who actually knew what they were talking about. the dividend stuff is confusing because it IS income on your taxes but NOT income for social security earnings test. wish they made this clearer!!

my cousin said his financial advisor told him to just not report the dividend income but that sounds like a bad idea to me?? the irs knows about it already right??

I've been collecting SS for 3 years now (I'm 64) and have a pretty large stock portfolio. As others said, dividends definitely don't count toward the earnings limit - but just so you know, once you reach your Full Retirement Age, the earnings limit goes away completely! So in a few years, you won't have to worry about ANY type of income affecting your benefits. Also worth noting that if you're under FRA and DO exceed the earnings limit, you don't permanently lose benefits. The SSA withholds $1 in benefits for every $2 earned over the limit, but when you reach FRA, they recalculate and give you credit for those months when benefits were reduced.

As someone who also inherited stocks and was confused about the SS rules, I wanted to add one more thing that might be helpful - keep good records of everything! I created a simple spreadsheet tracking my dividend payments, dates received, and which stocks they came from. Makes tax time much easier. Also, since you mentioned you're new to investing, you might want to research the "step-up in basis" rule for inherited stocks. When you inherit stocks, your cost basis is "stepped up" to the fair market value on the date of your uncle's death, which can save you a lot in capital gains taxes if you ever decide to sell. This is completely separate from the dividend issue, but it's another tax advantage of inherited stocks that many people don't know about. Sounds like you're being very responsible by asking these questions upfront rather than figuring it out after the fact!

Welcome to the community! I see you've gotten some excellent advice here already. Just wanted to add that the SSA's official website has a really helpful section called "How Work Affects Your Benefits" that breaks down exactly what counts as earnings for the earnings test. It's under the "Working While Receiving Benefits" section - might be worth bookmarking for future reference. Also, since you mentioned being new to stocks, don't feel pressured to make any quick decisions about what to do with your inheritance. Take time to learn about your options - whether that's keeping the stocks for dividends, selling some for diversification, or whatever works best for your financial situation. The fact that you're asking these questions shows you're being smart about it! One last tip: if you do decide to make any major changes to your portfolio down the road, consider consulting with a fee-only financial advisor who can help you understand the tax implications. But for now, you can breathe easy knowing those dividends won't mess with your Social Security benefits.

This is such a helpful thread! I'm in a similar situation - inherited some dividend-paying stocks from my grandmother and was worried about how it might affect my Social Security benefits. Reading through all these responses has really put my mind at ease. Just wanted to add one thing I learned from my tax preparer last year: if you have a lot of dividend income, it might push you into a higher tax bracket where more of your Social Security benefits become taxable (the 50% or 85% thresholds). This is totally separate from the earnings test everyone's been discussing, but it's something to keep in mind for tax planning purposes. The earnings test only cares about wages and self-employment income, but the taxation of your SS benefits looks at your total income including dividends. Not trying to complicate things - just thought it was worth mentioning since I wish someone had explained this distinction to me earlier! Sounds like you're being really smart about researching all this upfront. Best of luck with your inherited portfolio!